IN March Amtrak submitted its budget request to Congress for the 2015 financial year with a warning that a continuation of current levels of funding would leave its key Washington DC - New York - Boston Northeast Corridor (NEC) vulnerable to a failure "bigger, costlier and far more damaging than anything yet seen."
Travelling along the NEC, the investment deficit in North America's busiest passenger rail corridor is readily apparent, with ancient bridges, catenary and substations continuing to bear the strain of ever rising demand. In the last financial year Amtrak carried 11.4 million passengers on the NEC, and it shares the route with eight commuter rail operators and freight railways including Norfolk Southern and CSX. The line serves a region with a population of 55 million and an economy worth $US 2.6 trillion, one fifth of the United States' GDP.
According to a recent report published by the NEC Infrastructure and Operations Advisory Commission (NEC Commission), the loss of the corridor for a single day would cost nearly $US 100m in transport-related impacts and productivity losses.
Amtrak has called on policymakers in Washington DC to heed the findings of the report and provide a more stable basis for the investment needed to bring this vital transport artery up to modern standards. "Infrastructure deterioration and changes in business patterns have reached a point where something has to change," says Amtrak president and CEO Mr Joe Boardman. "If America wants a modern inter-city passenger rail system the problems of policy and funding must be addressed."
Amtrak will receive $US 1.3bn in operating and capital support from the federal government this year, and is seeking a 16% increase in its budget for next year - still a modest figure for a rapidly-growing operation with a huge maintenance backlog to deal with. Farebox revenue covered 89% of Amtrak's operating costs last year, significantly higher than any other US passenger rail operator.
Amtrak is calling for a shift in federal policy and funding arrangements to create a multi-annual capital investment programme, which would go some way towards tackling the financial uncertainty that has hamstrung the company since it was established in 1971. The operator has never had the benefit of a dedicated capital commitment, which would allow it sign multiyear contracts, and this has resulted in the deferral of major capital programmes to revive its infrastructure, in some cases for several decades.
Revenues on the NEC exceed operating costs by around $US 300m per year, but these funds are used to cover some of the operating costs of state-supported and long-distance services elsewhere on the Amtrak network. Amtrak argues that Congress needs to properly fund the operating and capital needs of long-distance trains to enable NEC revenues to go straight back into NEC infrastructure. Alongside an increased federal funding commitment, Amtrak sees potential for debt financing in situations where assets would generate sufficient revenues to cover the cost of debt service and loan repayments.
One example of this is the planned order for up to 28 high-speed trains, which will replace the Acela Express fleet on the NEC. This contract is currently being tendered in partnership with California High Speed Rail Authority, which is ordering an initial batch of 15 trains, and a preferred supplier is due to be announced before the end of the year. Amtrak says the purchase of these trains is dependent on securing funding through the Federal Railroad Administration's Railroad Rehabilitation and Improvement Financing programme or private financing.
Amtrak managers believe they have the support of many politicians at all levels of government who share the view that a shift towards multi-annual funding will help Amtrak to become more efficient and improve standards of service. "The federal government understands the challenges and the importance of addressing financing, so does Congress, and so do the states," Mr Matthew Hardison, chief marketing and sales officer for Amtrak, told IRJ in Washington DC. "Governments recognise the growth and success of the last 15 years and they recognise the importance of passenger rail to the United States. Amtrak has been successful in winning hearts and minds because we have delivered and we brought about the re-emergence of passenger rail in America."
Despite its ongoing funding difficulties, Amtrak has witnessed considerable growth in ridership across all sectors of its business over the last decade, with record passenger numbers in 10 of the last 11 years. In the 2013 financial year passenger numbers reached a new high of 31.6 million with ticket revenue increasing to $US 2.1bn, also the highest in the company's 43-year history.
Over the last year Amtrak has reorganised its activities into three business lines, responsible for the NEC, state-supported services, and long-distance services. The general manager of each unit is responsible for the operations, capital investment and financial performance of their part of the business, with targets for improving operating performance and customer service.
New legislation has also brought further changes to passenger rail in the United States. The Passenger Rail Investment Act 2009 (Pria) has ushered in a new governance model for the NEC with the establishment of the NEC Commission. Members of the commission include Amtrak, the states served by the route (and their respective commuter rail operators), and non-voting representatives of the freight railways which use the line. The commission's role is to address access fees and other aspects of the modernisation of the route.
"Under section 212 of Pria all operators using the NEC will be required to pay their fair share for access, and that dovetails with the capital investment programme," Hardison explains. "The most logical model will be a usage charge, which in effect will create stable, multi-annual funding. The timing is good and we're confident that we have a solution that will work. We think section 212 will precipitate some changes and it will lead to innovative solutions for the NEC."
There has also been reform on short-distance Amtrak routes, all of which became state-sponsored under Pria, meaning state governments now pay proportional costs associated with these services. "Last year we negotiated with 19 different states to get them all on the same contract basis, because under the legislation we have to treat all states the same," Hardison explains. "This means their cost recovery share for these services has gone up, and naturally people aren't excited about having to pay more for services. Relations with the states took a bit of a hit during this period, but now we're six months into the new contracts we're getting back onto an even footing."
Ridership rose 2.2% on state supported services in 2013 to reach 15.4 million and with several states investing in faster, more frequent services and new rolling stock, Amtrak says it is confident the upward trend will continue in this sector.
Described by Hardison as strategically important to the US, the long-distance network not only brings in substantial tourist revenue but also provides a vital public transport link between rural areas, regional towns, and major cities. Ridership on long-distance routes reached its highest level in 20 years in the 2013 financial year, when 4.8 million passengers used these services.
Amtrak says that state governments are "strongly committed" to the retention and expansion of long-distance services, many of which provide vital transport links in remote parts of the country, and in the absence of adequate federal funding some states are looking to find ways to invest together to guarantee the continued operation of their trains. Investment is being made in new locomotives and coaches with the aid of funding from the states and in some cases one-off federal grants, which have been funded through economic stimulus programmes, but Amtrak says more money will be required to fund passenger-focused infrastructure improvements on the freight railways.
In the meantime, Amtrak continues to work with the freight railways to improve the operation of passenger services. With 70% of Amtrak's train-km operating on other railways, this relationship is crucial to the success of many of its services. "By working with the Class 1s we have been able to progressively grow our operations and frequency and build corridor services such as those in California and the Pacific Northwest," Hardison says. "There have been bumps but the freight railways are generally good partners. I think there's good productive tension between the Class 1s and Amtrak which ensures our services are handled as expeditiously as possible."
Through measures such as the introduction of yield management and an imaginative approach to marketing, Amtrak has grown traffic over the last decade despite a paucity of capital, and Hardison is optimistic the trend is set to continue. "This is a great position for us to be in," he says. "Fifteen years ago it's where everyone at Amtrak wanted to be and we've achieved it. People now see passenger rail as a key part of the transport system, which wasn't the case before. All that really needs to change now is that we need a strategy on how to fund it properly."
